Level Funding Insurance
Level Funding Insurance is a hybrid of a traditional small group health plan and self-funded employee health insurance, level-funded insurance is an innovative risk-management insurance option that helps minimize the health insurance costs for small- and mid-sized businesses. A group-plan alternative to fully insured plans, level-funded plans are sometimes referred to as “partial self-funding.”
6 Reasons to Choose a Level-Funded Health Insurance Plan
Level-funded insurance helps protect your company’s investment in healthcare costs for your employees in a variety of ways.
- Predictable expenses. Level-funded payments are spread evenly over the course of 12 months. It is far easier to manage a budget and cash flow, especially for small businesses, when health insurance payments are predictable.
- Built-in insurance. Level-funded plans typically include stop-gap coverage (also known as reinsurance or stop-loss insurance) which protects against potentially budget-busting cost spikes should claims go over the claims fund.
- Healthy employees. In most cases, a level-funded insurance program is utilization based. If your company and employees are young and healthy, you could see some serious savings benefits with a level-funded health insurance plan that barely gets used.
- Fair risk assessment. Evaluating a company’s employee risk pool only – and not determining premiums based on a broad community sampling of people as traditional group policies tend to do – often results in lower overall risks and plans that cost less. Even if your employees fall into a variety of age brackets, the health risks within a company is lower than health risks facing the general population.
- Money back. The portion of a level-funded premium that is paid into a claims fund and goes unused by the end of the year is refunded to your business, unlike traditional plans which keep all the portion of unused claims set asides.
- Actionable information. Through helpful reports regarding level funding plan utilization, your business can identify the plan elements that are working, ways the plan is being abused, or where overspending is occurring. This knowledge shows you where the gaps are in your employees’ understanding of their insurance benefits – e.g., it costs less to go to an urgent care for a minor injury than to visit the emergency room – so you can educate them on the health insurance options available (and, ideally, reduce your costs in the process).
Pros and Cons of a Level Funding Plan for Your Business
Level funding insurance is a way to achieve the freedom that comes through a self-funded insurance plan while still knowing exactly what your budgetary demands will be from month to month for the entire year. There are set monthly premiums throughout the year in a level-funding plan that are typically divided three ways – hence the name “level.” A third of the premium goes to pay employee claims, a third is for plan admin, and a third invests in stop-loss coverage to protect your business from the risks of self-insurance.
Unexpected high costs are avoided with level funding insurance. In most cases, if you go over the claims amount that your business paid into your plan, the stop-loss insurance will take care of the overage. Even if there is a very large claim at any point in the year, it will not eat up the annual amount allotted for claims or create unexpected monetary demand.
Just like most group insurance plans, the number of employees within your company will affect your ability to contract with your desired health insurance carrier. Smaller companies may see greater advantages than larger entities.
Ultimately, level funding insurance can save you money, work better for your employees, and even see money going back into your revenue stream. Your tolerance for risk, the number of employees in your business, and the way you manage your budget will all influence your decision-making process when it comes to weighing the pros and cons of a level funding insurance plan. A representative from The Benefits Group can help. Contact us to schedule a consultation with one of our liaisons to learn more about level-funded and other group health insurance plan options.